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Order Fulfillment From The Dark Stores

Grocery segment is one of the most challenging sectors of the retail market today. Some of the reasons why an increasing number of consumers buy groceries online are convenience of shopping and / or Home delivery of purchased items. Growing interest by consumers to buy grocery online; has made retailers to launch internet based grocery selling channel. Since, almost all big retailers have entered into online selling, the competition has increased many fold. Seating at home, customer can browse through different web-sites to get the best deal in terms of price. Since groceries come under commodity segment, the only way retailers can attract customers is, by the services they offer to customers. In short, retailers are trying to attract customers by their method of order fulfillment and delivery.

While basics of order fulfillment have been kept unaltered, the retailers have adopted different locations from which online grocery orders are fulfilled. Several retailers employed mega warehouse model. Online grocery orders were fulfilled from massive, highly automated warehouses with sophisticated carousels and conveyors for order picking. Sooner, they realize that time and cost required to set up such warehouses is extremely high. Due to delay in automation and higher brake even points the cost of delivery became very high. To counter these problems, retailers like Tesco, started delivering online grocery orders from their existing store. In this model, retailer employs teams of people to pick the items of online grocery orders from the shelves of the nearest stores, and teams of drivers deliver the orders at agreed times. This model becomes extremely successful and popular because it offers several advantages. Delivering online orders from existing stores reduces the cost of setting up automated warehouse. Since the orders are delivered from nearest stores, transportation cost also reduces.

However, the volume online orders have ever been increasing. Because of this, when stores are crowded at weekends, the time during which maximum online orders are received, in-store pickers have to jostle their way down aisles and queue like any other shopper. This is severely impacting picking efficiency of pickers leading to cost escalations. Hence, retailers like ASDA and Tesco have come up with the concept of dark stores to fulfill ever increasing internet grocery orders. The dark stores are quiet same as standard supermarkets. They work in a similar way but the only people in them are company staff. Instead of the public browsing up and down the aisles, teams of workers push their own trolleys around to pick the customer orders. Availing the services of dark store, the customers can shop online and collect the order from the dark store within a few hours of ordering them.

From customers' perspective, the dark stores are boon to those who don't like to shop on their own and who don't have time to wait for the delivery of the products shopped on internet. Also, the customers are required to pay lesser amount for attaining the services of dark store, as compared to home delivery charges.

From retailers' perspective, setting up dark store is cheaper than setting up dedicated warehouse. Also, it is more efficient to pick orders from dark stores than from normal stores, mainly because there is no hindrance of other store customers.

However, what retailers need to ensure that, their order fulfillment and management system is capable of handling this model. Since, the window of fulfillment of online orders from dark stores in very short, often in the range of 2-3 hours, the order management system should be(In addition to standard features) -
- Able to send real time inventory updates to website
- Able to monitor the inventory real time and should be able to replenish it in quick time to reduce lost sales due to out of stock products
- Able to modify order picking slots, when order is sent for picking and when it is not sent for picking
- Able to handle situation when customer does not turn up to collect the order in his scheduled time slot
- Able to schedule and release the order for picking to the concerned dark store based on time of order creation and/or other priorities set by business
- Able to take into account, the issues related to order modification (like cancellation, addition of new products etc.) once the order has been already sent for picking.
- Able to handle return fulfillment with features like allowing customer to return the product either to dark store or to the nearest supermarket store

Can you think of some other feature required for order management system to handle order fulfillment from the dark stores?

Comments

Hi Pankaj,

I found the article to be crisp & informative, expecially for non Supply Chain background person.

Check if it is feasible to provide customers with an option to know about substitutes in case a particular product is not available. May be at the point of collection or on the website itself. There is a chance that customer might op for the substitute.

Keep writing..
Kunal

Thanks for the nice article, can you help me with the following questions?

1. how do you quantify the missed revenue due to short of inventory? because we display a tag 'Sold-out' on the items being selected into the order. So users don't even attempt to place orders.

2. when you have a dedicated counter and inventory for fulfilling the online orders, Dark Store is required to equip with all the facilities that a typical warehouse does. So what exactly is the difference between dark store and warehouse? other than the fact that Dark Store is attached to regular store open to customers.


Thanks
Narasimha

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